(Updates throughout, changes dateline.)
BUDAPEST, Aug 26 (Reuters) - Central European currencies
fell on Tuesday, even against a broadly weakening euro, as a
sharp fall in German business sentiment pointed to weakness in a
key destination for Central European exports.
Hungary's forint <EURHUF=>, the Czech crown <EURCZK=> and
the Polish zloty <EURPLN=> all shed about 0.7 percent over the
day against the euro, sliding after Germany's Ifo business
climate index hit a three-year low in August [].
They clawed back lost ground against the dollar in late
trade after the U.S. currency pared its gains.
"We had the Ifo, the dollar firmed to beyond $1.46 (to the
euro) and then emerging currencies weakened," one dealer said.
The forint led the decliners after its fall through key
levels triggered stop-loss orders at 236.50 against the euro,
but it had rebounded to 235.55 late in the session.
Analysts said concern over Hungary's budget deficit may put
additional pressure on the forint as press reports said Prime
Minister Ferenc Gyurcsany was expected to announce on Wednesday
a multi-year plan for sizeable tax cuts [].
"If there are signs that the budget is softened, the forint
is likely to weaken further," one dealer said.
The Czech crown could also remain under pressure given
expectations the Czech central bank, which earlier this month
became the first in the region to cut interest rates, could ease
monetary policy further as Europe's economies slow down.
But dealers said the dollar's movements would set the
direction for the currency in the short term.
"Everything is euro/dollar these days," one dealer said.
Poland's central bank will conclude its two-day rate-setting
meeting on Wednesday. It is expected to keep rates on hold but,
according to a Reuters poll [], a growing number of
analysts expect its interest rates have already peaked.
"For the zloty this would mean that the deteriorating
external balances... could lead to a weakening of the zloty over
the short run." Raiffeisen said in its weekly report on
currencies. "We therefore expect (at best) a sideways movement
around the level of EUR/PLN 3.30 this week."
Slovakia's central bank kept interest rates steady at its
meeting on Tuesday, in line with expectations for unchanged
interest rates before Slovakia adopts the euro in 2009. The
Slovak crown<EURSKK=> remained steady around 30.3 to the euro.
*************************MARKETSNAPSHOT************************
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.545 24.377 -0.69% +7.37%
Polish zloty <EURPLN=> 3.323 3.303 -0.61% +7.71%
Hungarian forint <EURHUF=> 235.55 233.82 -0.74% +6.84%
Croatian kuna <EURHRK=> 7.16 7.166 +0.08% +2.27%
Romanian leu <EURRON=> 3.542 3.519 -0.65% +1.07%
Serbian dinar <EURRSD=> 76.6 76.4 -0.26% +2.74%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +5 basis points to 1bps over bmk*
5-yr T-bond CZ5YT=RR +2 basis points to +7bps over bmk*
10-yr T-bond CZ10YT=RR 0 basis points to +31bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +9 basis points to +462bps over bmk*
5-yr T-bond HU5YT=RR +7 basis points to +440bps over bmk*
10-yr T-bond HU10YT=RR +8 basis points to +369bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1713 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
(Reporting by Reuters bureaus, Writing by Sandor Peto,
editing by Swaha Pattanaik)
